Hedonic estimation of housing demand elasticity with a markup over marginal costs

We show that recent developments in hedonic pricing theory allow modeling of the equilibrium pricing function as the marginal cost of an additional housing unit plus a markup that varies inversely with the elasticity of demand. Useful information about demand elasticity at a given point on the envelope function can be recovered from the hedonic regression and limited information on marginal costs. In particular, the elasticity of the envelope with respect to any characteristic such as interior area provides information on the elasticity of demand. Relative price elasticities (i.e., elasticities that vary from a base value in a known way with interior area, unit type or neighborhood characteristics) can be computed from the elasticity of the hedonic envelope. Like Yinger (2010), our method is based on a single hedonic equation.We test our method using sales of new high rise condominiums in two districts within Shenzhen, China: Futian and Longgang. The results strongly confirm the main hypothesis of this paper: price elasticity with respect to size is increasing for more complex types of units. Together with estimates of marginal costs of production, these results imply that relative demand elasticity is declining for larger, more complex units.     

Estimation and policy implications of rental housing demand

The demand for rental housing using the Annual Housing Survey SMSA sample for 1977 is estimated. The principal determinants of rental housing demand, namely housing price and permanent/transitory income, are computed through spatially varying hedonic price techniques and instrumental variables methods (relating to human and nonhuman capital), respectively. Based on the demand estimation results, impacts of hypothetical cash and rent subsidy programs are analyzed in terms of “housing” and “welfare” effects. It is found that a rent subsidy achieves considerably larger effects than does a cash subsidy.     

The influence of racial segregation on housing prices

Census tract data were used to investigate the influence of racial segregation on housing prices in the Oakland, California housing market. White renters were found to pay a premium to live in segregated neighborhoods. Racial differences in the implicit prices of specific housing characteristics were also observed in the rental market: a unit of housing space was more expensive in the black rental submarket, while a unit of housing quality cost more in the white rental submarket. No significant differences were found in the prices paid by black and white homeowners, although for methodological reasons these results were less reliable than those for rental housing.     

基于特征价格模型的住宅需求价格弹性分析——深圳住宅市场实证研究

基于特征价格模型(hedonic model)分析住宅价格包络函数曲线形态,边际价格增长速度随着特定特征值递增从呈现下降趋势转为呈上升趋势,即均衡价格曲线从凹向特征值轴转为凸向特征值轴.通过对深圳经济特区内外的两个住宅交易子样本进行hedonic分析,结果表明,均衡价格的增长速度随着特征变量面积的变化呈现由凹变凸的趋势...     

Estimating the Demand for Housing, Land, and Neighbourhood Characteristics

This paper provides estimates of the structure of demand for individual housing and neighbourhood characteristics and for land in two British cities. We estimate a hedonic price function, and from this obtain the implicit prices of house attributes. These prices are used to estimate a demand system for each city. These perform well, and enable us to calculate price and income elasticities for each of the non-dichotomous characteristics and for land. To counteract criticisms of demand estimates derived within the hedonic framework a method is developed for selecting an appropriate set of instrumental variables. Estimates derived from this method, however, differ only slightly from those obtained using the conventional techniques. Several features of these estimates provide insights into the unusual characteristics of the British housing market, the effects of constraints imposed by land use planning, and the effects of changing income distribution on the structure of demand.     

Hedonic prices, price indices and housing markets

This paper extends hedonic price analysis to the formation of housing price indices measuring variation within a metropolitan area. In forming these indices fifteen submarkets, heterogeneous across time and space, are described within a short-run equilibrium model. Linear functional forms are generally rejected using a method proposed by Box and Cox. Aggregation of hedonic price coefficients into standardized units yields significantly higher housing prices in the central city than in its suburbs, as well as differential effects of structural and neighborhood improvements among submarkets.     

Accounting for owner-occupied dwelling services: Aggregates and distributions

Research linking macro and micro statistics of dwelling services is in its infancy in the U.S. including work by the Bureau of Economic Analysis, Bureau of Labor Statistics, and the Census Bureau. Comparisons of aggregated estimates generated from micro-level data to estimates at the macro-level can inform both levels on the accuracy and precision of methods and data sources. In this study, the treatments of housing in the macro statistics of the National Accounts and in the micro statistics of household expenditure and income surveys are examined. Three approaches to value dwelling services using household survey data are compared: capitalization rate, hedonic, and rental equivalence. Estimates are produced using data from the U.S. Consumer Expenditure Survey and American Housing Survey. Estimated aggregates of implicit net rental income from owner-occupied housing are compared to the aggregate value in the National Accounts. Possible sources of differences in the macro- and micro-based aggregates are discussed. The effects of adding net implicit rental income on income distributions are examined, particularly on inferences about the relative well-being by the age of householder. Overall, only marginal reductions in income equality result when net rental incomes are added to before tax money income; this only occurs when reported rental equivalence and return to home equity are used as methods of rent estimation.     

现行政策下商业地产的发展趋势

一、现行宏观政策对商业地产的影响 从2004年起，鉴于政策导向，商业地产开发变得炙热起来。由于商业地产的利润比住宅开发要平均高出5％N10％，吸引了越来越多的投资者转向商业地产的开发。2005年1月1日开始，跨国零售商已开始在中国的全方位扩张。外资的到来推动国内商业市场发展，为商业地产带来巨大商机。2006年至2008...     

House price appreciation, liquidity constraints, and second mortgages

This paper analyzes how households use second mortgages in response to shocks to housing wealth. Two related questions are examined: Do households use home equity in response to house price appreciation? Are liquidity constraints important for homeowners? A theoretical model shows that liquidity-constrained households respond more strongly to house price changes than unconstrained households. Using PSID, I find noteworthy differences in borrowing patterns of homeowners by the ratio of wealth to income. Low wealth-to-income homeowners exhibit a strong reaction to house price appreciation, whereas high wealth-to-income ones do not. The results indicate the importance of liquidity constraints among homeowners.     

House price appreciation,liquidity constraints,and second mortgages

This paper analyzes how households use second mortgages in response to shocks to housing wealth. Two related questions are examined: Do households use home equity in response to house price appreciation? Are liquidity constraints important for homeowners? A theoretical model shows that liquidity-constrained households respond more strongly to house price changes than unconstrained households. Using PSID, I find noteworthy differences in borrowing patterns of homeowners by the ratio of wealth to income. Low wealth-to-income homeowners exhibit a strong reaction to house price appreciation, whereas high wealth-to-income ones do not. The results indicate the importance of liquidity constraints among homeowners.     

Intrametropolitan migration: A simultaneous model of employment and residential location of white and black households

This study explores the relationship between the home and job location of the household within a metropolitan area. The model is an extension of the Alonso-Muth framework and allows the household to simultaneously choose its residential and employment location, monthly rent, number of rooms and the type of structure of the dwelling unit, so as to maximize its utility subject to the budget constraint.The data base is the Home Interview Survey conducted in 1965 by the (San Francisco) Bay Area Transportation Study Commission. The coefficients in the simultaneous model are estimated by two-stage least squares. The cross-section sample is stratified by tenure into renters and homeowners; by race into black and white households; and further by position in the life-cycle.The results of the location equations reveal that both the home and job location are responsive to each other which implies that the decentralization of jobs will result in the decentralization of residences for black households. The results of the housing equations imply that black and white households have almost identical elasticity of demand for housing. There is very slight evidence of price discrimination against black households. However, there is evidence that black households do face a geographical segregated market for rental housing.The results of this study argue that the decentralization of population is not due solely to rising incomes and will continue as long as industry decentralizes. Furthermore, governmental policies of increasing the income of central city residents, through subsidies to employers to locate in the central city will have a strong effect: inducing those residents to remain in or move into the central city. Thus, a policy that is meant to alleviate the plight of the city center may only result in strengthening the racial and income split between the suburb and the central city inhabitants.     

A dymimic model of housing price determination

This paper presents and estimates a model of the resale housing market. The data are a cross-section of monthly time series obtained from the multiple-listing service for a suburb of San Diego. The model is specified and estimated as a dynamic multiple indicator multiple cause system of equations where the capitalization rate is taken to be an unobservable time series to be estimated jointly with the unknown parameters. These are estimated by maximum likelihood using an EM algorithm based upon Kalman filtering and smoothing.The specification of the model features hedonic equations for each house sale and a dynamic equation for the capitalization rate which is constrained to make the expectation of prices equal the present value of the net returns to home ownership whenever the economic variables stabilize at steady state values. Out of steady state, the capitalization rate slowly adapts to new information.The model attributes a large portion of housing price increases of the 1970's to a fall in the capitalization rate which in turn was driven by rental inflation, tax rates and mortgage rates. Post-sample simulations indicate an initial flattening of housing inflation rates and later a fall brought on by the increase in steady state capitalization rates. In-sample simulations show that although both Proposition 13 and the inflation induced rise in the marginal income tax rates provided partial explanations for the fall in capitalization rates, the single most important factor was the acceleration in price of housing services which interacted with the tax treatment of home ownership to produce an amazing 18% average annual rate of price increase over the last seven years of the 1970's.     

The demand for rental housing: Evidence from the Housing Allowance Demand Experiment

This paper provides new evidence on the price and income elasticities of demand for rental housing by low income households. Housing expenditures of households participating in the Housing Allowance Demand Experiment and receiving housing allowances in the form of a proportional rent rebate are analyzed. These rent rebates experimentally vary the effective relative price of housing and thus enable estimation of the price elasticities. Natural income variation enables estimation of income elasticities. Analysis is carried out using two functional forms and a variety of models of housing dynamics. The estimated income and price elasticities of demand are 0.36 and −0.22, respectively. When the sample is restricted to include only households headed by couples, the elasticity estimates are 0.47 for income and −0.36 for price. These estimates are lower (in absolute value) than have been previously estimated and it is suggested that this may be due to the low-income nature of the sample.     

Household Expenditure Patterns for Housing Attributes: A Linear Expenditure System with Hedonic Prices

The main objective of this research is to demonstrate a new approach to how income and own-price elasticities for housing attributes can be estimated. The methodology used is a combination of the hedonic technique and a complete system of household expenditures, which relies on an additive utility function. However, here we allow the utility parameters to vary with family size. The empirical results of a case study show that family size plays a significant role when estimating the elasticities. Furthermore, the housing attributes of living area and absence of traffic noise are more income elastic than those of lot size and indoor quality. All the income elasticities are positively correlated with income and family size but negatively with down payment.     

The house price determination process: Rational expectations with a spatial context

Applying the rational expectations hypothesis, this essay models the current value of a house as the conditional expectation of the discounted stream of housing services accruing to the owner of the house. The value of housing services is determined by neighborhood effects as well as the physical attributes of the property itself. In the existing hedonic literature, future transactions have not been utilized to describe neighborhood effects. The rational expectations asset pricing model in this study accounts for expected future neighborhood effects as well as observed current neighborhood effects. The reduced form of the rational expectations model is a spatial autoregressive (SAR) model with two spatial lags. After employing the generalized method of moments (GMM) in estimating the spatial asset pricing model, I find that both expected future transactions and prior transactions in the neighborhood are significant. The inclusion of expected future transaction prices in the neighborhood takes into account the influence of expected changes in the community and factors these potential changes into the current house price. This is consistent with forward-looking households. The forward-looking model generates superior out-of-sample prediction performance relative to both the conventional hedonic model without considering neighborhood effects or the standard spatial hedonic model including only past transactions.     

A comparison of household mobility for owned manufactured,traditional owned,and rental units using the American Housing Survey

This study employs data from the national sample of the American Housing Survey to analyze the mobility decisions of families in owned manufactured housing in comparison to families in traditional owned homes and rental units. Specifically a continuous time probability model (CTM) is used to estimate the likelihood of these families moving over the period of 1993–2001. In general, the empirical work suggests that families occupying both owned manufactured housing and traditional owned housing are associated with lower probabilities of moving than comparable households in rental units. Of particular interest is the fact that, ceteris paribus, families in both traditional owned homes and owned manufactured housing exhibit negative duration dependence, or a decreasing probability of moving over time, while for those in rental units duration dependence is positive. These differences are important because of their potential implications for long-term neighborhood stability and, as such, the viability of manufactured housing as an affordable housing alternative for lower income families.     

Hedonic analysis of a housing market in disequilibrium

This paper tests the hypothesis that information about housing market activity and about specific dwellings becomes capitalized into single family dwelling prices through a disequilibrium adjustment process. A dynamic price adjustment model, which is an extension of the standard hedonic model widely used in the literature, is derived, specified, and tested with both micro and aggregated data from the city of Chicago and for the period 1972–1976. The results show that from 32 to 75% of the variance in dwelling prices, unexplained by the standard hedonic attributes under assumptions of equilibrium, is explained by market activity signals such as mortgage interest rates and neighborhood transaction rates of the preceding period. Dwellings about which there is less information, making comparison pricing difficult, are shown to command a price premium. The standard equilibrium hypothesis appears readily rejectable and better predictions are obtained from the disequilibrium specifications. Several directions for extending this line of research are discussed.     

Explaining regional variation in equilibrium real estate prices and income

We combine the real estate model of Potepan (1996) with the spatial equilibrium approach of Roback (1982) to prove the interdependency of housing prices, rental prices, building land prices and income via one simultaneous equilibrium analysis. Using unique cross-sectional data on the majority of German counties and cities for 2005, we estimate the equations in their structural and reduced form. The results show significantly positive interaction effects of income and real estate prices. Moreover, we can confirm model predictions concerning the majority of exogenous determinants. In particular, expectations about population development seem to be among the most important determinants of price and income disparities between regions in the long term.     

Hedonic versus repeat-sales housing price indexes for measuring the recent boom-bust cycle

Standard housing price indexes rely on strong constant-quality assumptions and often conflict. Hedonic price indexes overcome limitations of median price and repeat-sales indexes but their implementation has been limited by a lack of data. This paper constructs hedonic indexes at the zip code level for the Los Angeles and San Diego metropolitan areas using considerably more detailed data than previously available. Our sample was collected by a mortgage technology firm, and consists of almost 1.1 million transactions during the boom-bust cycle since 2000. Our hedonic regressions include new spatial models that capture correlations within submarkets (using zip codes as proxies) and allow temporal asymmetry. Compared to a repeat-sales price index constructed from the same data, the hedonic indexes indicate that the market peaked about 11 months later in Los Angeles and about 2 months earlier in San Diego, show less pre-peak appreciation and post-peak depreciation in low-tier housing and more pre-peak appreciation in high-tier housing. We also find that the intensity of the cycle varies greatly across zip codes and price-tiers in a pattern consistent with foreclosure activity.     

Empirical analysis of the impact of a landlord-tenant ordinance on property values2

The purpose of this article is to analyze the impact of a landlord-tenant ordinance (LTO) on property values, using time series data for the City of Evanston, Illinois, where the ordinance has been enacted since 1975. The empirical data analysis, which includes a trend analysis of hedonic price indices for both rental and owner-occupied property, has shown that an LTO is not likely to significantly affect housing values. Those remedies provided in the LTO are not likely to be radical departures from the current practices such as housing/building code, and can therefore not be expected to affect housing values substantially.